Want to stay in your house, not a nursing home? Here’s how to make that happen

It’s estimated that by 2030, the U.S. population of adults age 65 and older will have nearly doubled from 2006 to 71 million people. Many aging Americans are marching headlong into retirement with big plans and no desire to leave their homes. This presents all sorts of issues. In a conversation with Scott Neal, a CPA and fee-only financial planner, Tom Martin focuses on a key concern: how to finance “aging in place.”

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A: A tsunami. It’s incredible that we are so ill-prepared for what’s coming at us.

Q: Am I correct that you need about 70 percent of your pre-retirement income if you hope to enjoy a comfortable lifestyle in retirement?

A: I would tend to look at it a little differently. In our practice, we measure standard of living as defined by the amount of money that’s available to spend after you’ve paid your taxes, your debts, your housing or whatever else you want to scrape off the top. That can be calculated. We calculate that “maximum sustainable living standard” number. And that number has to grow with inflation over the rest of your life. We typically will run those numbers out to age 100. And the true maximum number is the number that you would be able to spend this year adjusted for inflation and be broke at 100. That gives us a point of reference against which we can compare all kinds of different scenarios. So, we could say, ‘OK, one scenario is I don’t make it to 100.’ Well, we can then tell you, ‘Okay, if you die at 90, here’s how much money your children will accidentally inherit.’ So, that’s the way we begin to look at that and measure the impact that a particular decision will have on your future. We can look at all of the things that are going to confront you in that latter stage of life and calculate the effect that it will have on your living standard.

Q: What’s your assessment of the baby boom generation? Are boomers ignoring planning that they really ought to be thinking about?

A: I’m really afraid that the majority of folks in our age group are in denial. We just don’t plan for the eventualities that are going to confront us. They’re fairly predictable. David Solie in his book, “How to Say It to Seniors,” said that there are five different predictable dilemmas of aging. The first one of those is housing. What are we going to do about housing? Where am I going to live?

Q: Some of the research I’ve been seeing finds as many as 90 percent of baby boomers hope to “age in place”: to remain in their homes instead of moving to a retirement or assisted-living setting. And even if they begin to need day-to-day assistance or ongoing health care during retirement, around 80 percent would prefer to stay in their homes. Are they being realistic?

A: I’ve been in this business for about 35 years, and I think I’ve had one client in all that time say he wanted to go to a nursing home. The others have said that they want to stay at home. In reality, there are simply not enough beds to accommodate all of us in assisted-living centers and retirement communities. Now, they’re being built everyday. In Kentucky, we have a certificate-of-need issue that has to be addressed every time somebody wants to build a new facility for an assisted living center or skilled nursing facility. Simply put, there are not enough resources to accommodate all the demand that is going to come. So, many of us are going to naturally be living at home, or living with our children, or with other relatives.

Q: Staying at home has some cost considerations. Floor designs that allow for easier movement; perhaps a chairlift, an expensive installation; safety features like non-slip floor surfaces; bathroom aids like grab bars; maybe a personal alert system in case you slip and fall and you need emergency help; an entrance without steps or with a ramp; wider doorways; higher electrical outlets; lower electrical switches. These kinds of things suddenly become really necessary and they’re not free.

A: And they’re not widely available in many houses these days.

Q: How are people paying for this remodeling?

A: What we have to look for are ways to tap into the resources that we have. Go back to my illustration of the “maximum sustainable living standard.” Once we get down to that spending number, you’re going to spend it on different things. What we find is that people who are getting on in years are spending less. Material things mean a lot less to folks in the latter stages of life. We’ve constructed many plans where we have specified an “advanced age,” with the client saying, “OK, I’m going to be ‘advanced age’ at age 85.” We then start looking at the way that their money might be spent. We’re not a big fan of reverse mortgages because they are expensive, and it is taking out a mortgage on your house. There are some significant disadvantages to reverse mortgages. The home equity loan is an option. Interestingly enough, in Kentucky, if you can qualify for Medicaid, meaning that you have very, very limited resources, no more than $2,000, then there’s something called “money follows the person.” Once you’ve been in a nursing home and in a Medicaid bed for a certain period of time, I think it’s 90 days, then you can apply for this “money follows the person.” And if you can demonstrate that staying at home would be less expensive on the Medicaid system than being in a facility — it might involve having a family member stay with you part time, taking care of you; it might involve having other resources that come in — but then Medicaid will pay something for that.

Q: AARP found that more than half of adult children, 54 percent, think their parents will need their help. Only 27 percent of older parents agree with that. Who most often turns out to be right?

A: That’s only one of the many conflicts that I see between elderly parents and their adult children. Today’s seniors are very reticent to disclose all of their resources. What this boils down to very often is just a conflict in communication style between parent and child. Some parents will ask, “Why are they interested in that? I can take care of myself.” It’s a very independent generation. That’s one of the conflicts that we see.

Q: Could it be that giving in to your children’s perception that you need help means a loss of independence?

A: What we have to do is look at redefining what independence really means. The truth is that we are all dependent upon other people for different things. That’s part of what it means to be human. Tim Prosch wrote the book, “The Other Talk,” that we encourage every boomer to have with their adult children. The subtitle of the book is “A Boomer’s Guide to Talking with Your Family About the Rest of Your Life.” One of the first tasks is to be able to envision the future. Unfortunately, our society has led us down the path of believing that getting old is equal to being ill and being in a state of decline. I think getting old is just like any other stage of life. We need to have a contingency plan for what happens if things don’t work out exactly the way that we have intended.

Tom Martin’s Q&A appears every two weeks in the Herald-Leader’s Business Monday section. This is an edited version of the interview. To listen to the interview, find the podcast on Kentucky.com. The interview also will air on WEKU-88.9 FM on Mondays at 7:35 a.m. during Morning Edition and at 5:45 p.m. during All Things Considered.